How To Enter A Line Of Credit In QuickBooks

Do you want to easily set up a line of credit in QuickBooks to manage your everyday expenses and to give you instant financing for your payroll? Setting up a line of credit and recording it will definitely help you to boost up your savings, manage your expenses easily, and will help to simplify your cash flow to manage.

In this article, we will provide you a complete guide to setting up and recording a line of credit in QuickBooks. It is recommended to read the article till the end, this will make sure that you set up and record a line of credit easily in QuickBooks accounting software.

Introduction to Line of Credit in QuickBooks

In QuickBooks, you provide loans to your customers and vendors. Line of credit is the entries that give information about the credit which is given for the loan and the details of the amount recorded. The line of credit can also be reconciled with the past transactions of customers and vendors in QuickBooks. The Line of credit remains predefined in QuickBooks Desktop. When you make a transaction in QuickBooks Desktop, it gets reflected in the line of credit.

How to setup Line of Credit in QuickBooks

Let us have a look at the steps to set up a line of credit in QuickBooks. You have to create 2 accounts to start the setup of the line of credit. The 2 accounts are namely “Principal account” and “Expense account for interest”.

Step 1: Creating Principal Account

Steps to create a principal account:

  • First of all you have to go to the “Settings” option.
  • There you can get an option of Chart of Accounts, just click on it.
  • And click on the “New” option.
  • Open the “Account type” drop down list and then click on “Current Liabilities”.
  • And click on the “Detail Type” drop down list for the “Line of Credit” option.
  • Now you can give a name to this account.
  • Then you have to click on “Save and Close” to save all the changes.

Step 2: Creating an Expense Account for Interest

Steps to create an expense account for interest:

  • First of all you have to go to the “Settings” option.
  • And select the “Chart of Accounts” option.
  • Click on the “New” option.
  • Open the “Account type” drop down list and then click on “Expenses”.
  • And from the “Detail Type” drop down list and click the “Interest Paid” option.
  • Now you can give a name to this account.
  • Then you have to click on “Save and Close”.

Procedure to Track Line of Credit in QuickBooks

Now track the credit in QuickBooks by following the below procedure:

Step 1: Recording Line of Credit which is connected to a company

  • First of all you have to click on the “+” icon and then select “Bank Deposits”.
  • Now you have to make sure that you are depositing the correct deposit of accounts.
  • Move to the bottom of the screen and then add funds in the deposit section.
  • Open the drop down list you made and then select the credit card account.
  • And enter the deposited amount into your bank account.
  • Then select the “Save” option.

Step 2: Recording Interest Charges

  • First of all you have to click on the “+” icon and then select “Expense”.
  • Set the payment method as Credit card.
  • And click on the “Line of Credit Card” located at the top left side on your screen.
  • Choose the “Financial institution” name located at the top left side on your screen.
  • Then you have to click on “Payee Field”.
  • Open the Account drop down list and select “Interest Expense account” from it and then enter the amount of interest charged.
  • At last, click on “Save”.

Step 3: Paying the Bills from QuickBooks Line of Credit

In the third step, pay bills in QuickBooks Online for line of credit;

  • First of all you have to open the “Navigation” option and then select “Expenses” and then select “Vendors”.
  • Then you have to select “Vendor’s name”.
  • Now you have to go to the “Bill” option and then select the “Make payment” option in order to record the payment.
  • Then you have to click on the “LOC credit card account” and then open the drop down list of the “Payment account”.
  • Then you have to give all the details of the payment and then click on “Save”.

Procedure to Record the Amount of Payment in Line of credit

Now let us have a look at the steps to record the amount of payment to the line of credit in QuickBooks

Step 1: Cheque Payment

  •  First of all you have to go to the “+New” button
  • Go to the suppliers option and then click on the “Check” option. 
  • Open the “Payee field” and then enter the name of the financial institution.
  • Click on the “Bank Account Field” option.
  • Select a bank from the drop down list.
  • Open the “Category” option and then select a line of credit from the “Category type” option.
  • Then you have to fill the amount and then pay down the principal.
  • Again open the “Category” option and then select “Interest paid” from the Category option.
  • And fill the amount that you have to pay interest and then click on “Save”.

Step 2: Card Payment

When you make a payment using a debit card or credit card, then you can easily record it and then classify the expenses on the basis of principal and interest.

to manage the bill payments when amount goes directly from LOC

Let us have a look at the steps on how to manage the bill payments when the amount goes directly from LOC to the vendors.

Step 1: Write a Vendor Bill

  • First of all you have to write a vendor bill.
  • Now you have to go to the home screen and then click on the “Create +” button.
  • Then you have to click on the “Bill” option and then select “Vendor”.
  • Now you have to enter the date.
  • Then go to the “Account details” option and the select “Account=Purchases Expenses account”.
  • Enter the amount and then click on “Save and Close”.

Step 2: Create a Memo

  • Now you have to go to the home screen and then click on the “Create +” button.
  • Then you have to select “Journal Entry” and enter the date.
  • Open the Account dropdown list and then click on “Accounts payable”.
  • Then you have to go to the “Debit column” and then enter the amount paid to the vendor.
  • Create a memo.
  • Then you have to open the Name drop down list and then select the vendor whom you paid.
  • Now go to the 2nd line and open the Account dropdown list and then click on “Line of Credit account”.
  • Then you have to enter the amount that you have paid to the vendor and then create a memo.
  • Click on the “Save and Close” option to save all changes.  

Step 3: Recheck the Amount

  • Now you have to go to the home screen and then click on the “Create +” button.
  • Select the “Pay Bills” option.
  • And then the name of the vendor.
  • Choose a bank clearing account which will always have zero balance. 
  • Now a window will appear on your screen displaying a matching amount.
  • Select the check boxes to match the amount and clear the amount field zero.
  • And click on the “Save and Close” option.

Final Words.

We hope that now you can easily set up and record line of credit in QuickBooks by yourself. You should follow all the steps carefully mentioned above in the article. We will recommend you to read the entire article and follow all the steps without skipping a single step. You can drop a call to us if you need any help from Wizxpert through the QuickBooks experts.

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